Episode 41 – Beyond the E-Myth with Michael E. Gerber

One of the first episodes of The Extraordinary Business Book Club podcast featured an interview with Michael E. Gerber talking about one of the most extraordinary business books of all time – The E-Myth Revisited. So it feels very appropriate that we end 2016 with Michael talking about his new book, Beyond the E-Myth: The Evolution of an Enterprise: From a Company of One to a Company of 1000.

Michael turned 80 in 2016, but both the book and the interview demonstrate that his passion for helping small business owners achieve success hasn’t dimmed since The E-Myth was first published in 1985, in fact the sense of urgency and passion is if anything greater.

There are big questions in this episode, and the turn of the year is the perfect time to face them.

Look at yourself more seriously. Stop thinking about how you’re going to get by and start pondering what you’re going to leave behind.

Alison Jones: Hello and welcome to The Extraordinary Business Book Club. I’m so excited because today I’m here with Michael E. Gerber who wrote, I think, perhaps the world’s most famous book on small businesses, The E-Myth, which was later The E-Myth Revisited, which was the one book that when I set up my business, everybody told me I needed to read two years ago. They were right. Michael has transformed tens of thousands of small businesses and he’s just published what he’s calling the final book in the E-Myth trilogy, Beyond The E-Myth: The Evolution of an Enterprise: From a Company of One to a Company of 1,000! It’s an absolute delight to have you in the Club, Michael.

Michael E. Gerber: Well, thank you very much, Alison.

Alison Jones: We spoke, didn’t we, last year for the World-Changing Writers conference? It was a absolute delight to talk to you then about the E-Myth. And it’s great to bring this full circle and talk about the last book in the series.

Michael E. Gerber: Thank you. I’m delighted.

Alison Jones: Did you know that this was a trilogy when you started writing it?

Michael E. Gerber: No. Actually it came to me, as these things do, that as I began to introduce the book before it was published to a whole variety of people, those of have read my other books immediately got it. Those who hadn’t read my other books didn’t immediately get it, but when they read the other books, meaning The E-Myth Revisited and then Awakening the Entrepreneur Within, it instantly became obvious to them, so it became obvious to me that it was a trilogy that was needed. That’s what we’re in the process of them. We’re about to create a literal trilogy, including The E-Myth Revisited and Awakening the Entrepreneur Within and Beyond The E-Myth, all in hardback, all especially published, the first two by Harper, and we’ll bring them all together.

Alison Jones: It feels like a legacy piece as much as anything, doesn’t it? It’s interesting, you talk a lot in the book about legacy and we’ll go on to talk about the message of the book, if you like, because I think that’s really important. It really struck me that it feels like a legacy book as well. It feels like rounding things off in that sense that it’s simultaneously deeper and more passionate, but also more practical.

Michael E. Gerber: Well, thank you. Thank you. It always astonished me that almost nobody who had read any of my books actually read or remarked at reading the quotes at the start of every chapter. I had this conversation. We just completed the new Dreaming Room. I did my very first over the weekend on December 11th, 12th and 13th. We had a subsequent meeting to that with a number of people who were very, very passionate about joining us in our new movement, the Beyond The E-Myth movement. In the conversation I had with them, it came to me to be quite stunning that in fact none of them really did read the quotes or if they did, they didn’t understand them. I said to them, “If you were to read the quotes at the beginning of every chapter I’ve ever written, and then go and follow with the books from which I took those quotes, you’d immediately get a completely new understanding of all my writing.”

Alison Jones: Tell me a little bit more about that. You’ve chosen with great care and I did notice. I laughed a bit because I know you’ve got a Jackie Wilson quote in this one, haven’t you? I’d never seen that before.

Michael E. Gerber: Yeah, well, I just picked up one of the books from my library here. Just a second. Just a second. I’ll give you an example of that. In Chapter One in The E-Myth Enterprise … I don’t know if you’ve read that book. It’s called The E-Myth Enterprise and the Position of One: A Business Exists Only as It Is Perceived by Others. The quote is, “In too many situations we automatically experience people as ‘them’ — not ‘us.’ These jungle-type habits of mind are dangerous to our species.” That’s a quote from Ken Keyes. Of course, anybody who remembers the hippie days or the ’60s remembers him.

Alison Jones: He pre-dates me, I’m afraid. You’ll have to give me a bit more context.

Michael E. Gerber: He was one of the kings of hippies. There was another quote in Chapter Two. Chapter Two is The E-Myth Entrepreneur and the Five Essential Skills. The quote is, “The real unknown is an emotional unknown. We awaken to darkness.” That’s a quote from Jacob Needleman, who is a philosophy instructor at University of San Francisco and one of the leading thinkers, you might say new age thinkers, and has written innumerable books, brilliant books, mainly driven by the philosopher and mystic Gurdjieff. Are you familiar with Gurdjieff?

Alison Jones: No. I’m getting a whole education here.

Michael E. Gerber: That’s my point. My point is, if anyone who’s read any of my books were to follow up the quotes at the heading of every chapter of my books, they’d discover a completely different person than they think I am.

Alison Jones: Yeah. I love that.

Michael E. Gerber: In fact, they’d discover a completely point of view, different point of view than they think I’m sharing with them.

Alison Jones: Yeah. That’s what I mean about that blend of the mystical, almost; the passionate and the philosophical. There’s a real sense of urgency. There’s a real message here that really struck me, the further of it, alongside all that practical stuff. Maybe this is a good point, actually, to pull people back to explain a little bit about what the book covers because it’s very consistent with the E-Myth, but I think it does go further in setting out the exact sequence of steps that a company owner needs to take if they want to be able to scale this up. You make the point, as I say, about the legacy and actually you want to do this because you don’t want to just be doing and doing and doing in your job until you die. You don’t want to be creating a job. You want to be creating a company. Can you just talk us through it?

Michael E. Gerber: Sure. The important thing to understand about the word legacy is that most of us think some people have one, but most people don’t. In fact, that’s a completely incorrect or inaccurate way to think about the word legacy because every one of us have a legacy. It’s the question of, what is it, and what’s the difference between one legacy and another legacy? I’d like to ask the question of everyone. What’s the difference between the legacy, say, of a Steve Jobs or the legacy of a Gandhi or the legacy of a Mother Teresa or the legacy of a Ray Kroc at McDonald’s, or your legacy?

I’m suggesting that the difference is the extreme size of it and that at the extreme size of it you go deeper, deeper, deeper into it, you discover the extreme meaning of it. I’m suggesting that in this book, Beyond The E-Myth, and in our work Every Life A Legacy! – Every Small Business A School!, I’m saying it’s time for every single one of us to come to terms with our legacy and to begin to intentionally deal with the question during the time we’re here.

I’m suggesting that the entrepreneur within, the creator within, is in fact the one we must pursue earnestly if we’re to discover the meaning of what we do and the importance of what we do, and the deliberate action of pursuing what we do so as to leave a legacy that has and is moved by a deep question of meaning. What’s the meaning of this? What’s the meaning of it? I’m suggesting it isn’t about income. It isn’t about getting by. It isn’t about doing it, doing it, doing it, doing it. It’s about something significantly greater than that and I’m suggesting that in fact, should we not pursue that question, we are in fact satisfying ourselves with the status quo, and I’m saying the status quo makes fools of us all.

Alison Jones: I thought it was really neat, that linguist trick. That brought me up sharp actually, when you make that distinction between most business owners focusing on income and actually they should be focusing on equity, and that that’s the mindset shift, if you like, that changes you from giving yourself a job to building a company.

Michael E. Gerber: Yes, and coming to grips with the question then, so then if I were to approach my life more seriously, if I were to approach my relationship with the world more seriously, how would I go about doing it? That’s effectively what Beyond The E-Myth is all about, how I would effectively, more effectively, go about doing it. If in fact I believe every life a legacy, every small business a school, first of all, what would our legacy be, what do I intend to leave behind, and two, what do I teach in my school? So understand, big questions that nobody is asking when you think about internet, info-marketing, blah, blah, blah, blah, blah.

Alison Jones: Yeah, the tactics.

Michael E. Gerber: Yeah. It’s just so much broader than that.

Alison Jones: That is fascinating. I love that it starts the dream, that that is the foundation of everything, and that is quite a challenge. I was also interested in the fact that you make the case, this isn’t just about the reader. It’s not just about building your own legacy. It’s about actually, if we’re going to get ourselves out of the global mess that we’re in, it has to start from the ground up, and this is your economic duty, to make this work because we need it.

Michael E. Gerber: Absolutely.

Alison Jones: When you talk about legacy as well, you have a business which is incredibly successful and you have a portfolio of books. Actually quite a big portfolio of books now because you took the E-Myth and you applied it with joint authors across a whole variety of verticals, didn’t you? How do you see that legacy of yours, the business and the books, in a sense: which is your legacy, or are they embedded together?

Michael E. Gerber: They’re all one. Meaning, they all play a part in it and understand too that this whole question of legacy isn’t a question of self-importance. It’s not a question of my brand. It’s not a question of my self-indulgence. It’s truly a question of meaning, and so to me, when I say that, it’s not a personal dream. It’s an impersonal dream. It’s not about what I want for me.

It’s about what I’m here to create for them. If there’s not a them and a need among them for something more than what they have divined for themselves, then in fact each and every one of us have, I won’t use the word responsibility, though in fact it does ring of responsibility; have an opportunity to pursue something that in fact can have a profound impact on them, whomever it is I’m here to serve, in a way that I don’t understand yet. If that’s true, then that’s the path, the journey, that we set out to take.

I like to say it in this way. If we’re born in the image of God, and I believe we are and that may end up becoming a huge barrier between my conversation with the most secular among us and the most religious among us, but if we’re born in the image of God, and I believe we are, then it means we were born to create. In other words, the creator creates and each of us are born to create. If we’re born to create, then I ask the next question: What? Well, we’re born to create a world fit for God or whomever we believe that great creator to be. Then it becomes, so what would that look like?

You can begin to follow the logic tree and as you begin to follow that logic tree, you’ll see that in fact we are never truly, from the very beginning, taught to create. We’re taught to be good. In short, we’re taught to follow the bouncing ball, and to do our homework and to clean our room and to do all the things good little boys and girls are supposed to do. We in fact receive exactly that same message as we enter into the outer world into school, and so forth and so forth and so forth.

And we become oblivious to the fact that in fact being a creator, being like Steve Jobs or being like Ray Kroc of McDonald’s or being like any grand entrepreneur or creator of anything is very dangerous work because it immediately puts us into a place in which we’re very, very vulnerable. And to be very, very vulnerable is a great risk for every single one who opines to follow his or her muse to create, to create in a world in which creators are in fact not revered for creating, but exactly the opposite. In Australia it’s called the tall poppy syndrome.

Alison Jones: One thing that really struck me in the book, you mentioned the reviews that you’ve had and how one review after another, the first one might say this is the worst book ever, don’t read this book, and the next one will say, “Oh my God, this book changed my life. This is the most important business book ever written.” It really struck me that when you write, you put yourself out there. You talk about the story, don’t you, that you’re telling the story, you become the storyteller? People come to that story, look at it through their own filter, through their own preconceptions, their own expectations, their own story. You’ll find your people and you’ll find the people with whom it does not resonate. I thought that was a good lesson for writers there, that not everybody has to like you.

Michael E. Gerber: No, and everybody, I guarantee you, doesn’t.

Alison Jones: It’s got to be a bad thing if you don’t get any bad reviews, right?

Michael E. Gerber: No, it’s astonishing to me though. You’d say it would be purely one thing or purely another. I mean, how could you have such a variation in responses to one thing? Where one guy who’s supposedly brilliant says it’s stupid and another guy, purportedly brilliant, says it’s a work of genius. How is it possible? It’s like, you think that it would just all become one, it would be so obvious it was so great, but of course it isn’t.

Alison Jones: Of course not, but it’s a good lesson that, even a book like this can have its negative reviews. It just made me laugh. Talking about what the book and how the book and the business work together, I know when we first talked, you told me that the book came out of the seminar that you did. You know, overcoming the key frustrations in your business, and you had a guy from … Ballinger books, wasn’t it? That came in and said, “Hey, this should be a book.”

Of course that was the thing that made your message scale in a sense, isn’t it? From delivering it in a room to 40 people at a time to reaching millions of people over the years. It struck me that that was an interesting reflection on what you’re actually talking about, the business scaling as well and those levers that you have that can change it from something constrained to something that is beautifully scalable.

Michael E. Gerber: But interestingly, at the very beginning, all the way back in the very beginning, for me was in 1977, when I founded my first company. That was The Michael Thomas Corporation. I believe I’ve told you this story.

Alison Jones: Yeah. Tell it again. It’s a great story.

Michael E. Gerber: Michael and Thomas, and we decided to create this great company. In fact, Thomas came to me for a completely different reason. I had begun to work with clients of an ad agency in Silicon Valley and began to approach their business in a completely different way than the ad agency did. The ad agency was providing leads. Meaning, giving them scale, opening up the world to their clients, but more and more and more often you begun to realise, I did, as I had conversations with the founder of that ad agency that in fact most of their clients didn’t know what to do with leads.

They really didn’t understand how to relate to them. As I began to work with some of those clients to get them to understand that selling is a system and that in fact they had to approach those leads differently than they were accustomed to, and that in fact we could turnkey the way they responded to those leads, as we began to have this profound impact on those different companies, and they were high tech, no tech, low tech, all different kinds of companies, it became obvious to me that I knew something or I’d discovered something that none of those business owners had.

It really struck me and as I more I began to do that, suddenly I realised there was a business in that, and so because I couldn’t get the owner, the founder of the ad agency to alter his ad agency to fit this model I was creating, we decided to part the company. He brought in this other guy, the Thomas, to replace me. As I began to share with this guy Thomas what I was doing he said, “Well, where are you going?” I said, “I’m going to start a company to do that.” He said, “Well, I don’t want to stay here. I want to go with you.”

Alison Jones: “I’m in.”

Michael E. Gerber: I’m in and we did, so it became The Michael Thomas Corporation. We spent probably several months, Tom and I, before we ever opened our doors really working through the question, who are we and what do we do? Who are we and what do we do? Who are we and what are we going to do? In that we came up with this story. The story was very, very clearly my dream, my vision, my purpose, my mission; our dream, our vision, our purpose, our mission. We needed to articulate that clearly, and so we did.

Our dream, this is 1977, at the outset of a brand-new company … We’d never been in business before. He had more experience in business than I had. He had more education than I had. In fact, he was much, much brighter than I was. Tom was a genius. As we started, I framed it like this. Our dream was to transform this state of small business worldwide. Our vision was to invent the McDonald’s of small business consulting. Our purpose was to enable every independently owned small business to be as successful as a McDonald’s franchise was.

Our mission was to invent the business development system, the intelligent system that we could pass through to relative novice consultants, not experts. Not business experts, not sales experts or marketing experts, or financial experts whatsoever, but novices through whom we could in fact realise our dream to transform the state of small business worldwide. We started out in 1977 with that as our dictum. That was in fact what defined what The Michael Thomas Corporation was in fact going to be designed to do, understanding we didn’t know how to do that. In short, I don’t mean we didn’t know how to do that.

We hadn’t built out a system to do that, so we set about the task of doing just that, designing, building, launching and growing that business development system that we were then going to take to the small business owners there in San Mateo, California. But understand, at the very outset, neither Tom nor I set out to become coaches or business consultants. We set out to create a franchise prototype that we could literally scale worldwide. That was stated explicitly at the very outset of it.

The way we started this whole thing over 40 years ago was exactly the way I’m describing it now 40 years later in Beyond the E-Myth: The Evolution of an Enterprise: From a Company of One to a Company of 1,000! but to make it as simple and as easy and as definable and as doable by any single solitary soul who’s drawn to this story to understand that if they do not start their company that way, that company will invariably fail. It will fail to grow exponentially. It will in fact, in most cases, fail even to provide them with a reasonable income as most small businesses fail to do.

Our job now is to go out in my 80th year and to invite the smallest of the small, Alison. That means solitary folks working for themselves, doing what they’re doing either online or offline, brick and mortar or whatever to have them start their company all over again. I’m saying the job is about New Co, not about fixing Old Co. The job isn’t about fixing what you’ve got. The job is to start what you truly want, but before we even get to what you want we have to discover the dream, the vision, the purpose and the mission.

Alison Jones: One thing that really struck me was the way that you articulated what we need in the person at each of those stages, so you’ve got that sequence, dream, vision, purpose, mission, which I was saying earlier, it’s got this underlying passion, but also this real pragmatism as well. You wrap that up in the person. The dream is the dreamer, the vision is the thinker, and then what I loved, the purpose is the storyteller. I’d like to just come on to that in a minute. Then the mission is the leader. Actually, as a small business owner, you have all those roles and you have to inhabit each of those fully, don’t you?

Michael E. Gerber: You absolutely do and, as you know because you’ve read some of my other books, E-Myth books, in my E-Myth story, in my E-Myth book story I talk about the entrepreneur, the manager and the technician, so the three personalities of a small business owner. Essentially now I’ve departed from that, so this is no longer about the E-Myth point of view. It’s no longer about the entrepreneur, the manager and the technician. It’s now solely and clearly about the entrepreneur, and so I’m now taking the entrepreneur and assembling this four critical components of an entrepreneur no matter who that entrepreneur is, no matter what they’re about to create. There’s a dreamer, a thinker, a storyteller and a leader.

You must understand each of their roles and take them as seriously as you’ve ever taken anything before because without one of them, whether it be the leader or the storyteller or the thinker and especially the dreamer, without any one of them your outcome will never achieve the scale it must achieve if your company is going to ever successfully be acquired by someone else. What I’m essentially bringing to this whole question is the whole question of mortality. Meaning, Alison, at whatever age you find yourself at today, you’re closer to the endgame than you were two days ago.

Michael E. Gerber: I’m saying, well, it’s about the end game, is it not? It’s about the fact that none of us are going to live forever and certainly our companies are not going to live forever. And certainly when we begin to ask the question legacy, the question becomes very serious. No matter where we find ourselves, at what age we find ourselves, we understand we’re working toward an exit strategy. We’re working toward the end. It’s the long view, which must be inculcated into our short view.

Our short view must be then revisited in relationship to outcome. So the outcome of my company, the legacy of my company, the legacy of my life, what I’m leaving behind and how I get from here to there is in fact the critical question that I’m dealing with in a very circumspect way in Beyond the E-Myth. Step one, step two, step three, step four, step five, step six, step seven, step eight. Because I’m dealing with it that way, it means that it’s now more available to every single person who’s listening to us today.

Alison Jones: Thank you so much, Michael. Actually I found it quite moving. This has been such a long story and such a passion, and to hear you talk about that legacy piece and also just reminding everybody listening, do you know, you only have a short time? That’s the context in which you’re looking at your business and your life. I think it’s probably one of the most powerful messages we’ve talked about on this show. Really, really important. Thank you for making it so articulately and so eloquently.

Michael E. Gerber: Thank you, Alison. A delight, as always, speaking to you and give my very, very, very, very best to every single person you speak to, and send them to buy the book.

Alison Jones: You know I will. I’ll put the link up there. Before I let you go completely though, Michael, I always ask all my guests, what would be your one best tip? We have a lot of first-time business book authors listening to the podcast. What bit of advice would you want to give them?

Michael E. Gerber: I would say, look at yourself more seriously. Stop thinking about how you’re going to get by and start pondering what you’re going to leave behind. That’s not a financial question. It’s not an economic question, even though that’s there of course, but it’s in fact a social question. It’s an existential question. Who am I? Why am I here? What is this all about? Until you bring that to bear on everything you do every day, you’re simply succumbing to a state of mind which allows you to avoid asking those questions because they’re too difficult to answer.

Alison Jones: I cannot improve on that. Thank you so much. I really hope that that has been as helpful to people listening as I have to say I found it myself. Thank you so much, Michael.